13 October, 2008

Jubilant Organosys

Current market price: Rs 206

Target price: Rs 383

Upside: 85.9%

Brokerage: Reliance Money

Jubilant Organosys and Eli Lilly have entered into a 50:50 joint venture agreement in India, focusing on providing drug development services. This is a strategic collaboration which would be focusing exclusively on developing new drugs in the areas of oncology, metabolic disease, cardiovascular and diabetes. This Bangalore based joint venture will focus on developing molecules from the preclinical stage to the Phase II stage. Both the partners will jointly invest $8 million in this venture over the next three years.

By leveraging the expertise of Eli Lilly in the R&D capabilities, Jubilant would strengthen its drug discovery and development portfolio. Also, the partnering of global innovator such as Eli Lilly would boost the global acceptance for Jubilant’s CRAMS and accordingly result in an earning traction. Jubilant’s topline is expected to grow at a CAGR of 35 per cent and net profits at a CAGR of 26 per cent over FY08-10E, on account of robust growth prospects available across the CRAMS segment and better performance by Hollister. The stock currently trades at a P/E of 9x FY10E earnings. Maintain Buy.